If a hit penetrates, you can assign it to a damage box, no matter how much damage it is, and check off the box. If you assign it to a Protective Value box, that's pretty much it. It's absorbed by the armor. If you assign it to a sub-system box, however, that sub-system goes out.
What really rocks here is the player chooses what box to check off, and assigning sub-system hits is making your armor less effective in interesting ways rather than just numbers.
Here's a couple of examples - a Flak Jacket with integrated Comms, and a suit of high tech scout armor.